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Firms that pursue extremely high or extremely low levels of diversification perform better than those that pursue moderate levels of diversification.

A) True
B) False

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Win Goods Inc. is a large multinational conglomerate. As a single business unit, the company's stock price is estimated to be $200. However, by adding the actual market stock prices of each of its individual business units, the stock price of the company as one unit would be $300. What is Win Goods experiencing in this scenario?


A) diversification discount
B) learning-curve effects
C) experience-curve effects
D) economies of scale

E) All of the above
F) None of the above

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________ is best described as a firm's ownership of its production of needed inputs or of the channels by which it distributes its outputs.


A) Venture capitalism
B) Bootlegging
C) Vertical integration
D) Crowdsourcing

E) C) and D)
F) A) and C)

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Real Goods Inc. is a large conglomerate. The company's beverages strategic business unit (SBU) has been recognized as a cash cow, and its tobacco SBU has been categorized as a dog. Which of the following can be inferred from this scenario?


A) While the tobacco SBU operates in a low-growth market, the beverages SBU operates in a high-growth market.
B) The management of the company should use the cash inflow from the beverages SBU and invest it in the tobacco SBU.
C) While the market share of the company in the beverages industry will be high, the market share in the tobacco industry will be low.
D) The tobacco SBU should follow a backward integration strategy, and the beverages SBU should pursue a forward integration strategy.

E) C) and D)
F) B) and C)

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Discuss the benefits of taper integration.

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Taper integration has several benefits:
...

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Which of the following is an example of an external transaction cost?


A) the cost of setting up a production unit
B) the cost of searching for a contract manufacturer
C) the cost of recruiting and retaining employees
D) the cost of maintaining plant and machinery

E) All of the above
F) B) and C)

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Which of the following best illustrates site specificity?


A) equipment necessary for mining bauxite and aluminum smelting
B) bottling machinery to manufacture bottles with trademarked shapes
C) investment made in human capital to master procedures of a specific organization
D) investment made to train employees to operate computers

E) B) and D)
F) B) and C)

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Which of the following best illustrates forward vertical integration?


A) A firm that manufactures and sells car engines to major automobile companies launches its own line of cars.
B) A chain of ice cream parlors launches a brand of toys and accessories for children.
C) A multinational coffee chain sources its coffee beans from plantations in Brazil and Vietnam.
D) A designer shoe company that previously purchased leather from external suppliers establishes its own leather tannery.

E) All of the above
F) A) and C)

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Hiku Inc. developed a superior touch screen technology for tablet computers that enabled multiple users to operate the screen at the same time. The technology was leased to Broadway Technologies, a consumer electronics company, for five years. Which of the following alternatives to integration does this best illustrate?


A) licensing
B) franchising
C) crowdsourcing
D) bootlegging

E) A) and B)
F) All of the above

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Not all firms are motivated by a need to grow.

A) True
B) False

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Banana Computers has decided to procure processing chips required for its laptops from external suppliers instead of manufacturing them in their own facilities. How will this decision affect the firm?


A) The firm will be protected against the principal-agent problem.
B) The firm's administrative costs will be low because of necessary bureaucracy.
C) The firm will have more flexibility in purchasing and comparing prices of goods and services.
D) The firm will have high-powered incentives, such as hourly wages and salaries.

E) C) and D)
F) A) and D)

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________ are best described as costs that occur due to political maneuvering by managers to control capital and resource allocation and the resulting inefficiencies stemming from suboptimal allocation of scarce resources.


A) Fixed costs
B) Influence costs
C) Coordination costs
D) Opportunity costs

E) C) and D)
F) All of the above

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Incline Electronics relied on a large chain of consumer electronics stores to sell its tablet computers, cell phones, and televisions and also to provide customer service and technical support. However, that retailer outsourced its service departments, and customers began to complain that they could not get reliable tech support for Incline products. In response, Incline Electronics decided to set up its own tech support department, and it also began to investigate opening its own brand-based retail stores. What does this scenario best illustrate?


A) crowdsourcing
B) new product development
C) forward vertical integration
D) conglomerate diversification

E) None of the above
F) B) and C)

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How is an equity alliance different from a joint venture?


A) An equity alliance involves ownership that facilitates transaction-specific ventures; a joint venture involves taking ownership by buying stock.
B) An equity alliance involves taking ownership in a partner; a joint venture involves two or more entities owning a firm.
C) An equity alliance involves taking ownership in a partner; a joint venture involves taking ownership by buying stock.
D) An equity alliance involves partners contributing equity to a joint venture; a joint venture involves two or more entities owning a firm.

E) A) and D)
F) C) and D)

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A conglomerate receives less than 70 percent of its revenues from any single business and features a number of strategic business units that have little to no relationship with each other.

A) True
B) False

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In the context of the Boston Consulting Group (BCG) growth-share matrix, if one of the strategic business units of a conglomerate is categorized under dogs, the management should


A) infuse more capital into the strategic business unit.
B) provide more human resources to the business.
C) hold the business till it turns into a star.
D) divest the strategic business unit.

E) All of the above
F) B) and C)

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Greenway Industries is a major multinational conglomerate. Its business units compete in a range of industries, including home appliances, pharmaceuticals, commercial real estate, and plastics manufacturing. Although its largest business unit, which produces kitchen appliances, is among the most profitable in the industry, it generates only 35 percent of the company's revenues. Which of the following is most likely true of Greenway's stock price?


A) It is valued at less than the sum of its individual business units.
B) It is valued at greater than the sum of individual business units.
C) It is valued at the exact sum of individual business units.
D) It is consistently lower than the industry average.

E) B) and C)
F) A) and B)

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Discuss the application of the core competence-market matrix.

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To survive and prosper, companies need t...

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When executives of a firm consider business opportunities only where they can leverage their existing competencies and resources, it can be concluded that the firm is using


A) related-constrained diversification.
B) related-linked diversification.
C) strategic outsourcing.
D) offshore outsourcing.

E) A) and D)
F) B) and D)

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HealthTech wanted its research partner, an R&D company, to develop a cancer vaccine. However, the project required huge capital investments, and its research partner was not ready to solely face the risks involved. Thus, to gain its partner's confidence and to prove its involvement, HealthTech invested $100 million in the project. This investment made by HealthTech will result in a


A) cartel.
B) credible commitment.
C) corrective action.
D) parent-subsidiary relationship.

E) None of the above
F) All of the above

Correct Answer

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Showing 41 - 60 of 100

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